TIDMOTM
RNS Number : 0133U
Ottoman Fund Limited (The)
15 December 2011
THE OTTOMAN FUND LIMITED (the "Company")
Notice of Final Results for the year ended 31 August 2011
The Company is pleased to announce as follows its final results
for the year ended 31 August 2011, a full copy of which will also
be shortly available on the Company's website:
www.theottomanfund.com.
Enquiries:
Singer Capital Markets
James Maxwell 0203 205 7500
Vistra Fund Services Limited 01534 504 700
Company Secretary
Chairman's Statement
Our net asset value as at 31 August 2011 was 74.7 pence per
share as compared with 81.6 pence per share a year earlier. The
primary drivers of this reduction in net asset value were write
downs of our investments in Bodrum and Alanya. In Sterling terms we
wrote down Bodrum by approximately GBP4.1 million in accordance
with Savills's valuation and the loan to Mandalina, in relation to
the Alanya apartments, by approximately GBP2.4 million. Each of our
assets is independently valued by two valuation companies, and we
traditionally rely on the Savills valuation for our financial
statements. Our valuations as at 31 August 2011 in US dollars and
as compared with the prior year are:
Savills TSKB Average Average
31 August 2011 31 August 2011 31 August 2011 31 August 2010
($) ($) ($) ($)
---------- ---------------- ---------------- ---------------- ----------------
Riva 108,770,000 112,580,000 110,675,000 102,833,500
---------- ---------------- ---------------- ---------------- ----------------
Bodrum 33,082,000 35,990,000 34,536,000 36,460,371
---------- ---------------- ---------------- ---------------- ----------------
Kazikli 7,775,000 9,125,000 8,450,000 9,360,708
---------- ---------------- ---------------- ---------------- ----------------
Alanya 10,057,000 8,322,000 9,189,500 10,523,464
---------- ---------------- ---------------- ---------------- ----------------
TOTAL 159,684,000 166,017,000 162,850,500 159,178,043
========== ================ ================ ================ ================
We have made progress over the last year. In April, we entered
into an agreement with our partner at Kazikli to sell that asset to
him for $9.5 million. He paid us a twenty-five percent cash down
payment with the remainder due in August. He had issues with paying
the remainder as promised, so, by mutual agreement, we extended the
time for payment to 31 December 2011. We are hopeful that the
transaction will close on that date.
This has also been the best year since inception for sales at
Alanya. In calendar year 2011 our advisor sold twenty-four units
with fifty units remaining. Our advisor achieved this result by
building relationships with local, rather than foreign, brokers and
increasing broker commissions. Of the remaining fifty-one units,
sixteen are duplexes that are damaged because of construction
issues. Once repairs are completed this winter, we expect to
discount them to encourage sale, either individually or to a bulk
buyer. The increase in broker commissions, running costs of the
Turkish holding company (primarily repairs and maintenance, taxes,
utility fees and purchases of white goods), and the price reduction
for the duplexes are the primary reasons for the board's write down
of the Alanya asset.
With respect to both Riva and Bodrum, we have had a fair amount
of interest, especially in the first half of the year, though once
the European financial crisis hit, interest decreased. For Turkey,
both Bodrum and Riva are very large assets that will appeal to a
limited number of buyers. In Turkey, as elsewhere throughout the
world, cash buyers for large plots of vacant land outside of the
city center are few and far between. Because of this global risk
aversion it is difficult to predict when these assets will be
monetized. But there have been positive developments in connection
with both assets. At Riva, one major Turkish developer has begun
construction of a development that will comprise about 100 single
family homes. And Bodrum remains the premium resort area in Turkey
with an ever diminishing supply of large land plots.
Political and Economic Development
Certainly compared with much of the rest of the world Turkey has
enjoyed political stability and relative economic prosperity over
the last year. The ruling AKP party's landslide victory in the
recent election solidified its position and extended its power over
the parliament, the executive branch, the media, business, and even
the army. Many believe that AKP's success is due in large part to
public satisfaction with Turkey's economic performance over the
last decade, where under AKP leadership Turkey's GDP almost
tripled.
Although by global standards Turkey has done relatively well
since the start of the global financial crisis in 2008, Turkey has
strong trading links with Europe and the troubles in the Euro zone
certainly affect Turkey. Though counterbalancing the deterioration
in European finances have been capital inflows from the Middle East
and lately the Arab spring countries - which view Turkey as a safe
haven in the region. This inflow of middle-eastern capital has
partially insulated Turkey from the full effects of the current
Euro zone crisis.
According to a recent OECD report, Turkey's strong growth in
early 2011, driven by private consumption and investment, has been
slowed by the Government's credit containment policies and
deteriorating global conditions. As a result, the OECD projects
that Turkey's real GDP growth will slow to 3% in 2012 and some
commentators expect even lower growth. The OECD predicts, though,
the recovery of GDP in 2013 as the external environment improves.
The new Turkish Lira underwent a sharp exchange rate depreciation
in 2011, depreciating approximately twenty per cent against a
basket of currencies. This depreciation, the OECD believes, should
gradually help rebalance domestic and external demand and narrow
the large current account deficit, which by mid-2011 approached 10%
of GDP. The OECD notes however that the depreciation of the Lira
may also put upward pressure on inflation, which is now running on
an annualized basis at around ten percent.
I look forward to reporting to you next when we release our
mid-year results for the period ended 29 February 2012.
Respectfully yours,
John D. Chapman
Chairman
6 December 2011
Consolidated Statement
of Comprehensive Income
For the year ended 31 August 2011
Year ended Year ended
31 August 31 August
2011 2010
notes GBP GBP
Revenue
Bank interest 153,089 152,141
---------- ----------
Total revenue 153,089 152,141
Operating expenses
Management/advisory fee 4 (311,890) (600,621)
Other operating expenses 5 (917,995) (1,734,182)
Inventory impairment 10 (4,144,485) -
Loan impairment 11 (2,481,093) -
Total operating expenses (7,855,463) (2,334,803)
Foreign exchange losses 12 (1,318,641) (682,998)
Loss for the year (9,021,015) (2,865,660)
---------- ----------
Other comprehensive income:
Foreign exchange on subsidiary translation (284,154) 258,424
Other comprehensive (loss)/income for the year (284,154) 258,424
---------- ----------
Total comprehensive loss for the year (9,305,169) (2,607,236)
---------- ----------
Loss attributable to:
Equity shareholders of the Company (9,021,014) (2,865,651)
Minority interests (1) (9)
---------- ----------
(9,021,015) (2,865,660)
---------- ----------
Total comprehensive loss attributable to:
Equity shareholders of the Company (9,305,157) (2,607,248)
Minority interests (12) 12
---------- ----------
(9,305,169) (2,607,236)
---------- ----------
Basic and diluted earnings per share (pence) 7 (6.69) (2.13)
All items in the above statement derive from continuing
operations.
Consolidated Statement of Financial Position
As at 31 August 2011
2011 2010
notes GBP GBP
Assets
Non-current assets
Intangible assets 8 2,180 2,687
Plant and equipment 9 3,949 7,548
Inventories 10 89,500,205 92,474,333
Loans and receivables 11 4,800,000 7,470,112
------------ ------------
94,306,334 99,954,680
Current assets
Other receivables 15 944,508 1,055,067
Cash and cash equivalents 20 7,180,340 9,249,402
------------ ------------
8,124,848 10,304,469
Total assets 102,431,182 110,259,149
------------ ------------
Liabilities
Current liabilities
Advances received 24 (1,461,165) -
Other payables 16 (351,100) (335,052)
(1,812,265) (335,052)
Net assets 100,618,917 109,924,097
------------ ------------
Equity
Share capital 17 127,483,015 127,483,015
Retained earnings 18 (26,796,485) (17,775,471)
Translation reserve (67,646) 216,508
------------ ------------
Equity attributable to owners of the parent 100,618,884 109,924,052
Minority interests' equity 33 45
------------ ------------
Total equity 100,618,917 109,924,097
------------ ------------
Net asset value per ordinary share (pence) 19 74.7 81.6
Consolidated Statement of Changes
in Equity
Share Retained Translation Minority
capital earnings Reserve interest Total
GBP GBP GBP GBP GBP
For the year ended
31 August 2011
As at 1 September 2010 127,483,015 (17,775,471) 216,508 45 109,924,097
Loss for the year - (9,021,014) - (1) (9,021,015)
Foreign exchange on
subsidiary translation - - (284,154) (11) (284,165)
At 31 August 2011 127,483,015 (26,796,485) (67,646) 33 100,618,917
----------- ------------- ------------- -------- -----------
For the year ended
31 August 2010
As at 1 September 2009 135,483,052 (14,909,820) (41,895) 33 120,531,370
Return of capital (8,000,037) - - - (8,000,037)
Loss for the year - (2,865,651) - (9) (2,865,660)
Foreign exchange on
subsidiary translation - - 258,403 21 258,424
At 31 August 2010 127,483,015 (17,775,471) 216,508 45 109,924,097
----------- ------------- ------------- -------- -----------
Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 August 31 August
2011 2010
GBP GBP
Cash flow from operating activities
Net loss (9,021,015) (2,865,660)
Adjustments for:
Interest (153,089) (152,141)
Depreciation 3,599 7,274
Amortisation 507 1,455
Impairment of inventory 10 4,144,485 -
Impairment of loan 11 2,481,093 -
Previously capitalised expenses written off - 342,134
(2,544,420) (2,666,938)
Net foreign exchange (gains)/losses (506,904) 941,395
Decrease/(Increase) in
other receivables 110,559 (68,992)
Increase/(Decrease) in
payables 1,477,213 (18,288)
----------- -----------
Net cash inflow/(outflow) from operating activities before interest,
depreciation, amortisation
and tax (1,463,552 ) (1,812,823 )
Interest received 153,089 152,141
Net cash inflow/(outflow) from operating activities (1,310,463) (1,660,682)
Cash flow from investing activities
Purchase of inventories 10 (1,170,357) (321,495)
Purchase of plant and equipment - (412)
Sale of plant and equipment - 5,638
Purchase of intangible assets - (916)
Repayment of loan 11 510,654 834,294
----------- -----------
Net cash (outflow)/ inflow from investing activities (659,703) 517,109
Cash flow from financing activities
Return of Capital - (8,000,037)
----------- -----------
Net cash outflow from financing activities - (8,000,037)
Net decrease in cash and cash equivalents (1,970,166) (9,143,610)
Cash and cash equivalents at start of the year 9,249,402 18,366,304
Effect of foreign exchange rates 12 (98,896) 26,708
----------- -----------
Cash and cash equivalents at end of the year 7,180,340 9,249,402
----------- -----------
Notes to the financial statements
1. General information
The Ottoman Fund Limited has invested in Turkish land and new
build residential property in major cities and coastal destinations
aimed at both the domestic and tourist markets.
The Company is a limited liability company domiciled in Jersey,
Channel Islands.
The Company is quoted on the AIM market of the London Stock
Exchange plc.
These consolidated financial statements have been approved by
the Board on 14 December 2011.
2. Accounting policies
The consolidated financial statements of the Group for the year
ended 31 August 2011 comprise the Company and its subsidiaries,
listed in note 13, (together, the "Group") and have been prepared
in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board
(IASB) and interpretations issued by the International Financial
Reporting Committee of the IASB (IFRIC).
The following published standards are mandatory and have been
amended during the current accounting period and could be relevant
to the Group, these amendments have had no significant impact on
the financial statements (no new standards were issued which were
relevant to the Group and applicable for the year under
review):
IFRS 2, 'Share based payment'
IFRS 5, 'Non current assets held for sale and discontinued
operations'
IFRS 8, 'Operating segments'
IAS 1, 'Presentation of financial statements' IAS 7, 'Statement
of cash flows' IAS 17, 'Leases' IAS 18, 'Revenue' IAS 36,
'Impairment of assets' IAS 38, 'Intangible assets' IAS 39,
'Financial instruments: Recognition and measurement' IFRIC 9,
'Reassessment of embedded derivatives' IFRIC 16, 'Hedges of a net
investment in foreign operation'
The following standards and amendments to published standards
are mandatory for the current accounting period beginning on 1
September 2010 but are not relevant to the Group:
Amendment to IFRS 2, 'Share-based payments - Group cash-settled
payment transactions'
Amendment to IFRS 1, 'First-time adoption', on 'Additional
exemptions'
Amendments IAS 32, 'Financial instruments: Presentation', on
'Classification of rights issues'
Amendment to IFRS 1, 'First time adoption', on financial
instrument disclosures
(a) Basis of preparation
The consolidated financial statements have been prepared on a
historical cost basis.
(b) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 August each year. The consolidated
financial statements are prepared using uniform accounting policies
for like transactions. Control exists when the Company has the
power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. The financial statements of the subsidiaries are
included in the consolidated financial statements from the date
that control commences up to the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
The Group applies a policy of treating transactions with
minority interests as transactions with parties external to the
Group. Minority interests represent the portion of profit and net
assets not held by the Group. They are presented separately in the
consolidated statement of comprehensive income and in the
consolidated statement of financial position separately from the
amounts attributable to the owners of the parent.
Joint ventures
A joint venture is a contractual arrangement whereby the Group
and another party undertake an economic activity that is subject to
joint control; that is, when the strategic financial and operating
policy decisions relating to the activities require the unanimous
consent of the parties sharing control.
The Group reports its interests in jointly controlled entities
using proportionate consolidation. The Group's share of the assets,
liabilities, income, expenses and cash flows of jointly controlled
entities are combined with the equivalent items in the results on a
line-by-line basis.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised
using the effective interest method. Interest on short term
deposits, expenses and interest payable are treated on an accruals
basis. Revenue from sales of inventory is recognised when the
significant risks and rewards of an asset have been
transferred.
(d) Expenses
All expenses are charged through the income statement in the
period in which the services or goods are provided to the Group
except for expenses which are incidental to the disposal of an
investment which are deducted from the disposal proceeds of the
investment.
(e) Non current assets
General
Assets are recognised and derecognised at the trade date on
acquisition and disposal respectively. Proceeds will be measured at
fair value which will be regarded as the proceeds of sale less any
transaction costs.
Intangible assets
Intangible assets are stated at cost less any provisions for
amortisation and impairments. They are amortised over their useful
life of 6 years. The amortisation is based on the straight-line
basis. At each balance sheet date, the Group reviews the carrying
amount of its intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss.
Plant & Equipment
Plant and equipment is stated at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
charged so as to write off the cost of assets over their estimated
useful lives, using the straight line method on the following
basis:
Leasehold improvements 3 years
Furniture and fittings 5 years
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the income
statement.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Land inventory is recognised at the time a liability is
recognised - generally after the exchange of unconditional
contracts.
Net realisable value will be determined by the Board as the
estimated selling price in the ordinary course of business less
costs to complete and selling costs. In determining the net
realisable value, the directors take into account the valuations
received from the independent appraisers, market conditions at and
(where relevant and appropriate) after the balance sheet date, and
offers received from third parties by the Company.
The valuations of the properties performed by the independent
appraisers are based on estimate and subjective judgements that may
vary from the actual values and sales prices realised by the
Company upon ultimate disposal.
Impairment is recognised through the income statement at the
time that the Board believes the net realisable value is lower than
cost and will remain so for the foreseeable future.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis.
Where they are denominated in a foreign currency they are
translated at the prevailing balance sheet exchange rate. Any
foreign exchange difference is recognised through the income
statement.
Loans are reviewed for impairment by the Board on a semi-annual
basis; any impairment is recognised through the income
statement.
(f) Cash and cash equivalents
Cash and cash equivalents comprise current and short term fixed
deposits with banks.
(g) Taxation
Throughout the year under the Jersey "Zero/Ten" regime the
Company was zero rated for Jersey taxation purposes. Profits
arising in the Company for the 2011 year of assessment and future
periods will be subject to tax at the rate of 0%. However,
withholding tax may be payable on repatriation of assets and income
to the Company in Jersey. The Company pays an International
Services Entity fee and neither charges or pays Goods and Services
Tax, this fee is currently GBP200 (2010: GBP100) per annum for each
Jersey registered company within the Group.
The subsidiaries will be liable for Turkish corporation tax at a
rate of 20%. Additionally, a land sale and purchase fee may arise
when land is sold or purchased.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the temporary differences can be
deducted.
(h) Foreign currency
In these financial statements, the results and financial
position of the Group are expressed in Pound Sterling, which is the
Group's presentation currency. The functional currency of the
Company and Jersey subsidiaries is Pound Sterling; the functional
currency for the Turkish subsidiaries is Turkish Lira.
The results and financial position of the entities based in
Jersey are recorded in Pound Sterling, which is the functional
currency of these entities. In these entities, transactions in
currencies other than sterling are recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary
balances (including loans) and non-monetary balances that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
The results and financial position of the entities based in
Turkey are recorded in Turkish Lira, which is the functional
currency of these entities. In order to translate the results and
financial position of these entities into the presentation currency
(Pounds Sterling):
- non-monetary assets (including inventory) are translated at
the rates of exchange prevailing on the dates of the
transactions
- monetary balances (including loans) are translated at the
rates prevailing on the balance sheet date and
- items to be included in the income statement are translated at
the average exchange rates for the year unless the average is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the
transactions.
Foreign exchange gains or losses are recorded in either the
income statement or in equity depending on their nature.
(i) Share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown as a
deduction to reserves. Any redemption in shares is deducted from
ordinary share capital with any transaction costs taken to the
income statement.
(j) Critical accounting estimates and assumptions
The Board makes estimates and assumptions concerning the future
in the preparation of the financial statements. The resulting
accounting estimates will, by definition, seldom equal the related
actual results. The estimates, assumptions and judgements that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are outlined below.
Principal assumptions underlying management's estimation of net
realisable value
In reflection of the economic environment and market conditions
during the prior year which continued throughout to the financial
year end, the frequency of transactions similar to the inventory
and apartments on an arms length basis decreased compared to prior
periods.
The Board have reviewed the independent valuations that have
been provided and believe impairment is necessary to the inventory
and the loan receivable. Please refer to notes 10 and 11 for
further details.
Critical judgements in applying the Group's accounting
policies
The Group did not make any critical accounting judgements during
the current financial year.
(k) New standards and interpretations not applied
At the date of the authorisation of these consolidated financial
statements, the following statements, standards and interpretations
were in issue but not yet effective:
IFRS 9, 'Financial instruments' - classification and
measurement' (effective 1 January 2013)
IFRS 10, 'Consolidated financial statements' (effective 1
January 2013)
IFRS 11, 'Joint arrangements' (effective 1 January 2013)
IFRS 12, 'Disclosures of interests in other entities' (effective
1 January 2013)
IFRS 13, 'Fair value measurement' (effective 1 January 2013)
IAS 28 (revised 2011), 'Associates and joint ventures'
(effective 1 January 2013)
The Directors anticipate that the adoption of these standards
and interpretations in future periods will have no material impact
on the financial statements of the Group.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to
the Group is considered to be the Board itself. The factor used to
identify the Group's reportable segments is geographical area.
Based on the above and a review of information provided to the
Board, it has been concluded that the Group is currently organised
into one reportable segment: Turkey.
There are two types of real estate projects within the above
segment; these are development land and new build residential
property. There are three individual projects held within the
development land type and one project in new build residential
property. The CODM considers on a quarterly basis the results of
the aggregated position of both property types as a whole as part
of their ongoing performance review.
The CODM receives regular reports on the Company's assets by the
Investment Advisors, Civitas Property Partners S.A. During this
financial year Civitas have provided detailed reviews as requested
of the Turkish economy and real estate market and also their
strategic advice regarding the individual properties listed in the
table on page 2. In addition the year end valuations provided by
Savills and TSKB are reviewed and reported on by the investment
advisor to the Board of Directors.
Other than cash and cash equivalent assets and related interest
and charges, the results of the Group are deemed to be generated in
Turkey.
4. Management/Advisory fee
2011 2010
GBP GBP
Management fee 311,890 600,621
------- -------
Civitas Property Partners S.A. ("Civitas") were appointed as
Investment Advisors to the Group on 2 December 2009. The advisory
fee structure is incentive-based with an annual fixed component of
EUR212,500 as of 1 January 2011, previously EUR425,000, and an
incentive component based on a percentage of realisation value.
Civitas were paid GBP311,890 (2010: GBP285,683) during the
period.
5. Other operating expenses
2011 2010
GBP GBP
Legal and professional fees 143,054 96,596
Advisory and consultancy fees 174,471 162,414
Marketing 280 578,445
Travel and subsistence 48,274 70,590
Directors' remuneration 150,000 138,385
Administration fees 80,068 122,099
Audit services 51,200 53,764
Depreciation 3,599 7,247
Amortisation 507 1,455
Other operating expenses 266,542 503,187
------- ---------
917,995 1,734,182
------- ---------
The Group has no employees.
6. Tax 2011 2010
GBP GBP
Irrecoverable overseas tax 13,227 -
------ ----
13,227 -
------ ----
This tax represents irrecoverable withholding tax on bank
interest. Subsidiary taxation has been included in other operating
expenses.
7. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2011 2010
Loss attributable to equity holders of the Company (9,021,014) (GBP2,865,651)
------------ ---------------
Weighted average number of ordinary shares in issue 134,764,709 134,764,709
------------ ---------------
(b) Diluted
The diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. As the
options expired without exercise (see Note 17), the basic and
diluted earnings per share are the same.
Both the basic and diluted earnings/(loss) per share are
calculated as (6.69) pence (2010: (2.13) pence).
8. Intangible assets
Cost GBP
At 1 September 2010 and 31 August 2011 10,132
Amortisation
At 1 September 2010 (7,445)
Charge for the year (507)
------
At 31 August 2011 (7,952)
------
Net book value at 31 August 2011 2,180
------
Net book value at 31 August 2010 2,687
------
The intangible asset relates to computer software, with a useful
life of 6 years. There has been no impairment during the year.
9. Plant and equipment
Furniture and Leasehold
fittings improvements Total
GBP GBP GBP
Cost
At 1 September 2010 and 31 August 2011 18,246 46,501 64,747
Depreciation
At 1 September 2010 (12,294) (44,905) (57,199)
Charge for the year (3,399) (200) (3,599)
------------- ------------ -------
At 31 August 2011 (15,693) (45,105) (60,798)
------------- ------------ -------
Net book value at 31 August 2011 2,553 1,396 3,949
------------- ------------ -------
Net book value at 31 August 2010 5,952 1,596 7,548
------------- ------------ -------
10. Inventories
2011 2010
GBP GBP
Opening book cost 92,474,333 92,494,972
Purchases at cost 1,170,357 321,495
Previously capitalised expenses written off - (342,134)
Impairment of inventory (4,144,485) -
------------ -----------
Closing net realisable value/book cost 89,500,205 92,474,333
------------ -----------
This represents 149,550 square metres of development land on the
Bodrum peninsula, 931,739 square metres on the Riva coastline and
209,853 square metres, of which the Group has a 50% share, in the
Kazikli village, in the district of Milas. See note 24 regarding
the subsequent sale of Kazikli village.
In accordance with the accounting policy in note 2, inventories
are stated at the lower of cost and net realisable value.
Inventories were valued at the year end by Savills on the basis of
market value. On this basis, a total market value of GBP91.5
million (2010:GBP91.6 million) has been determined for inventories
held by the Group at the balance sheet date. In accordance with the
Group's accounting policy, unrealised gains or losses as a result
of this valuation have not been recognised in the consolidated
income statement.
The impairment above relates to Bodrum. The Directors believe
the net realisable value (GBP20,231,164) at the year end was lower
than cost and have therefore impaired the asset accordingly.
11. Loans and receivables
2011 2010
GBP GBP
Opening balance 7,470,112 9,014,112
Repayment of loan (510,654) (834,294)
Impairment of loan (2,481,093) -
)
Exchange gain/(loss) on revaluation of loans 321,635 (709,706
Closing balance 4,800,000 7,470,112
---------- ---------
Previously, the third party loan in respect of the investment in
the Riverside Resort in Alanya had been made to the developer,
Okyap1 In aat ve Muhendislik ve Ozel E itim Hizmetleri Sanayi ve
Ticaret Limited irketi ("Okyap1").
On 3 December 2010, as a means of achieving improved economic
benefit for the Group, a fiduciary agreement and a settlement
agreement were signed by all relevant parties which resulted in the
loan due to the Group (EUR8,193,091 at the time of signing the
agreement) and the titles of the apartments being assigned to
Mandalina Yap1 Turizm Sanayi ve Ticaret A. . ("Mandalina") for the
ultimate benefit of the Group. Mandalina is not a part of the Group
(see Note 22 for details relating to the shareholders). In order to
further protect the Group's interest in the Alanya apartments, the
Group holds signed share transfer letters from the shareholders of
Mandalina which may be executed at any time at the discretion of
the Directors and would transfer ownership of the shares in the
Mandalina from the existing shareholders to the Group.
The loan has been impaired to reflect the anticipated amount to
be received based on the value of the Alanya apartments and future
running costs of Mandalina which are deducted from the sales
proceeds of the Alanya apartments before being remitted to the
Group.
The valuation of the Alanya apartments used by the Directors in
the assessment of the recoverability of the loan is based on
estimate and subjective judgements that may vary from the actual
values and sales prices realised upon ultimate disposal.
12. Foreign currency losses
2011 2010
GBP GBP
Translation of cash balances (98,896) 26,708
Other foreign currency loss (1,219,745) (709,706)
Net currency losses (1,318,641) (682,998)
---------- --------
Subsidiary cash balance translations are recognised in the
translation reserve. The Company has no accounts in any currency
other than Pound Sterling.
13. Investment in subsidiaries - Company
Country of Authorised Issued Ownership
Name incorporation share capital share capital %
Ottoman Finance Company I Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company II Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company III Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company IV Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company V Limited Jersey GBP10,000 GBP1 100
Osmanli Yapi 1 Turkey YTL 46,146,312 YTL 46,146,312 99.99
Osmanli Yapi 2 Turkey YTL 188,284,941 YTL 188,284,941 99.99
Osmanli Yapi 3 Turkey YTL 5,249,584 YTL 5,249,584 99.99
Osmanli Yapi 4 Turkey YTL 11,249,104 YTL 11,249,104 99.99
Osmanli Yapi 5 Turkey YTL 14,390,000 YTL 14,390,000 99.99
14. Interests in joint ventures
The Group has the following interest in a joint venture, Mobella
Insaat Taahhut Turizm San ve Tic A.S. ("Mobella"), a project
management company.
Country of Domicile Ownership
Mobella Turkey 50%
Summarised financial information of joint venture is as
follows:
Non-Current Current Assets Non-Current Current Equity Revenue Expenses Loss
Assets Liabilities Liabilities
Mobella 1,476 107,506 - (224,889) (115,907) - (100,051) (100,051)
-------------- -------------- -------------- -------------- -------- ------- --------- --------
According to the Turkish Commercial Code if a company has lost
two thirds of its equity then it is technically considered to be
insolvent and the shareholders are required to inject further
capital. Mobella is contracted to be sold post year end as part of
the sale of the Kazikli land (see note 24) at which time the shares
will be transferred. The Group will not remain liable for losses
incurred to date.
15. Other receivables
2011 2010
GBP GBP
Prepayments and accrued income 76,410 104,074
VAT receivable 683,133 685,998
Other receivables 184,965 264,995
------- ---------
944,508 1,055,067
------- ---------
The Directors consider that the carrying amount of the above
receivables approximates to their fair value. Prepayments include
advances to suppliers.
16. Other payables
2011 2010
GBP GBP
Accruals 49,713 113,002
Other payables 301,387 222,050
------- -------
351,100 335,052
------- -------
The Directors consider that the carrying amount of the above
payables approximates to their fair value.
17. Share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
Issued and fully paid: GBP
2 founder shares of no par value -
134,764,709 ordinary shares of no par value (2010: 134,764,709) 127,483,015
-----------
On 24(th) June 2011, 2 founder shares of no par value held by
Herald Charitable Trust were transferred to Vistra Nominees I
Limited. These shares are not eligible for participation in the
Company's investments and carry no voting rights at general
meetings of the Company. The Company's former broker, Numis
Securities Limited, held an option to purchase 1.25% of the issued
share capital of the Company at a price of GBP1 per share. This
option lapsed without being exercised on the 5th anniversary of
admission, being 28 December 2010.
Capital Management
As a result of the Group being closed-ended, capital management
is wholly subject to the discretion of the Board and is not
influenced by subscriptions or redemptions. The Group's objectives
for managing capital are to maintain sufficient liquidity to meet
the expenses of the Group as they fall due; to invest in the
Group's current assets when the Board feels it will give rise to
capital appreciation; and to return capital to shareholders where
possible.
Movements in ordinary share capital during the year Number GBP
Ordinary shares in issue at 1 September 2010 134,764,709 127,483,015
Movement during the year - -
----------- -----------
Ordinary shares in issue at 31 August 2011 134,764,709 127,483,015
----------- -----------
18. Retained earnings
2011 2010
GBP GBP
At start of year (17,775,471) (14,909,820)
Bank and deposit interest earned 153,089 152,141
Operating expenses (7,855,463) (2,334,803)
(7,702,374) (2,182,662)
Net movement on foreign exchange (1,318,641) (682,998)
----------- -----------
Loss for the year (9,021,015) (2,865,660)
Minority interests 1 9
----------- -----------
At end of year (26,796,485) (17,775,471)
----------- -----------
19. Net asset value per share
The net asset value per ordinary share is based on the net
assets attributable to equity shareholders of GBP100,618,917 (2010:
GBP109,924,097) and on 134,764,709 ordinary shares
(2010:134,764,709), being the number of ordinary shares in issue at
the year end.
20. Cash and cash equivalents
2011 2010
GBP GBP
Bank balances 7,180,340 9,249,402
--------- ----------
7,180,340 18,366,304
--------- ----------
Cash and cash equivalents contain the deposit for Kazikli
village (see note 24 for further details).
21. Financial instruments
The disclosure on the financial instruments has been limited to
the consolidated financial position. This approach has been adopted
as this covers all of the principal risks associated with the
Group.
The disclosures below assume that the properties held by the
Group are in US Dollars as this is the currency in which they are
valued by Savills. In the opinion of the directors this is also the
currency that any future disposals would occur in.
The Group's financial instruments comprise loans, cash balances,
receivables and payables that arise directly from its operations,
for example, in respect of sales and purchases awaiting settlement,
and receivables for accrued income.
The principal risks the Group faces from its financial
instruments are:
(i) Market risk
(ii) Credit risk
(iii) Foreign currency risk
(iv) Interest rate risk
(v) Liquidity risk
As part of regular Board functions, the Board reviews each of
these risks. As required by IFRS 7: Disclosure and Presentation, an
analysis of financial assets and liabilities, which identifies the
risk to the Group of holding such items, is given below.
(i) Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments used in the Group's operations. It
represents the potential loss the Group might suffer through
holding market positions as a consequence of price movements. The
Group has no such exposures to market price risk.
(ii) Credit risk
The Group's third party loan in respect of the investment in the
Riverside Resort in Alanya is potentially at risk from the failure
of the third party. On 3 December 2010, the third party loan was
assigned to a related entity, see note 11 for further information.
The largest counterparty risk is with the Group's bankers.
Bankruptcy or insolvency of Deutsche Bank International Limited may
cause the Group's rights with respect to cash held to be delayed or
limited. There is no policy in place to mitigate this risk as the
Board believes there is no need to do so.
The Board does not monitor the credit quality of receivables on
an ongoing basis. Cash balances have been placed with Deutsche Bank
International Limited due to its Moody's credit rating of Aa3.
The Group's principal financial assets are other receivables and
cash and cash equivalents. The maximum exposure of the Group to
credit risk is the carrying amount of each class of financial
assets. Loans and receivables are represented by loans to and
receivables from third parties. Other receivables are represented
mainly by prepayments and other receivables where no significant
credit risk is recognised.
Credit risk exposure
In summary, compared to the amounts in the consolidated
statement of financial position, the maximum exposure to credit
risk at 31 August 2011 was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 31 August at 31 August at 31 August at 31 August
2011 2011 2010 2010
Non-current assets GBP GBP GBP GBP
Loans and receivables 4,800,000 4,800,000 7,470,112 7,470,112
Current assets
Cash and cash equivalents 7,180,340 7,180,340 9,249,402 9,249,402
Other receivables 944,508 944,508 1,055,067 1,055,067
------------ ------------ ------------ ------------
15,603,333 15,603,333 17,774,581 17,774,581
------------ ------------ ------------ ------------
Fair value of financial assets and liabilities
The book values of the cash at bank and loans and receivables
included in these financial statements approximate to their fair
values.
(iii) Foreign currency risk
The Group operates Pound Sterling, Euro, US Dollar and Turkish
Lira bank accounts. Exchange gains or losses arise as a result of
movements in the exchange rates between the date of a transaction
denominated in a currency other than Sterling and its settlement.
There is no policy in place to mitigate this risk as the Board
believes such a policy would not be cost effective.
Currency rate exposure
An analysis of the Group's currency exposure in Pound Sterling
is detailed below:
Currency Non-current Net monetary Liabilities at Non-current Net monetary Liabilities at
assets at 31 assets at 31 31 August 2011 assets at 31 assets at 31 31 August 2010
August 2011 August 2011 August 2010 August 2010
GBP GBP GBP GBP GBP
Pounds Sterling - 1,874,849 (49,713) - 5,116,217 (85,211)
Euro 4,800,000 1,912,374 - 7,470,112 1,369,837 -
US Dollar 89,500,205 1,758,716 (1,461,165) 92,474,333 2,699,103 -
Turkish Lira 6,129 766,644 (301,387) 10,235 784,260 (269,841)
--------------- -------------- --------------- --------------- -------------- ---------------
94,306,334 6,312,583 (1,812,265) 99,954,680 9,969,417 (355,052)
--------------- -------------- --------------- --------------- -------------- ---------------
Foreign currency sensitivity
The table below details the Group's sensitivity to a 5% increase
in the value of Sterling against the relevant currencies. This
percentage is considered reasonable due to volatility in current
and historic exchange rate movements. With all other variables held
constant, net assets attributable to shareholders and the change in
net assets attributable to shareholders per the consolidated income
statement would have decreased by the amounts shown below. The
analysis has been performed on the same basis as 2010.
Currency Profit & Loss at Equity at Profit & Loss at Equity at
31 August 31 August 31 August 31 August
2011 2011 2010 2010
GBP GBP GBP GBP
Euro 335,619 - 441,997 -
US Dollar 87,936 4,475,010 134,955 4,623,717
Turkish Lira 38,332 306 39,213 512
---------------- ---------- ---------------- ----------
461,887 4,475,316 616,165 4,624,229
---------------- ---------- ---------------- ----------
A 5% weakening of Sterling against the relevant currency would
have resulted in an equal but opposite effect on the amounts in the
financial statement above to the amounts shown above, on the basis
that all other variables remain constant.
(iv) Interest rate risk
Interest rate movements may affect: (i) the fair value of the
investments in fixed interest rate securities, (ii) the level of
income receivable on cash deposits, (iii) interest payable on the
company's variable rate borrowings. There is no policy in place to
mitigate this risk as the Board believes such a policy would not be
cost effective.
The Company holds only cash deposits.
The interest rate profile of the Group excluding short term
receivables and payables was as follows:
Currency Floating Non interest Floating Non interest
rate bearing rate bearing
at 31 August at 31 August at 31 August at 31 August
2011 2011 2010 2010
GBP GBP GBP GBP
Pounds Sterling 1,875,580 26 5,177,528 -
Euro 1,912,336 4,800,038 1,369,837 7,470,112
US Dollar 129 92,719,957 2,699,103 92,474,333
Turkish Lira 17,855 154,625 2,934 10,235
------------ ------------ ------------ ------------
3,805,900 97,674,646 9,249,402 99,954,680
------------ ------------ ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments:
2011
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 7,180,340 - - - 7,180,340
--------- ------ ------- --------- ---------
7,180,340 - - - 7,180,340
--------- ------ ------- --------- ---------
Non-interest bearing
Other receivables 261,375 - 683,133 - 944,508
Advances received - (1,461,165) - -(1,461,165)
Other payables (351,100) - - - (351,099)
-------- ----------- ------- ----------
(89,725) (1,461,165) 683,133 - (867,756)
-------- ----------- ------- ----------
2010
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 9,249,402 - - - 9,249,402
--------- ------ ------- --------- ---------
9,249,402 - - - 9,249,402
--------- ------ ------- --------- ---------
Non-interest bearing
Other receivables 369,069 -685,998 -1,055,067
Other payables (335,052) - - - (335,052)
-------- ------- ---------
34,017 -685,998 - 720,015
-------- ------- ---------
Interest rate sensitivity
An increase of 100 basis points in interest rates during the
period would have increased the net assets attributable to
shareholders and changes in net assets attributable to shareholders
by GBP71,803 (2010:GBP92,494). A decrease of 100 basis points would
have had an equal but opposite effect.
(v) Liquidity risk
The Group's assets mainly comprise cash balances, loans
receivable and development property, which can be sold to meet
funding commitments if necessary. As at 31 August 2011 the Group
does not have any significant liabilities due.
The Group has sufficient cash reserves to meet liabilities
due.
22. Related party transactions
Information regarding subsidiaries can be found in note 13.
Information regarding the joint venture can be found in note
14.
John D. Chapman is a shareholder in the Turkish subsidiaries due
to Turkish law requirements. Mr Chapman receives no additional
benefit from being a shareholder of the Turkish subsidiaries.
Information regarding Directors' interests can be found in note
23.
Ali Pamir is a director of the Investment Advisor, Civitas
Property Partners S.A. and is a director and shareholder of the
Turkish subsidiaries due to Turkish law requirements. Mr Pamir
receives no additional benefit from being a shareholder of the
Turkish subsidiaries.
Information regarding amounts paid to the Investment Advisor can
be found in note 4.
Sinan Kalpakcioglu has been engaged during the period as a
Turkish resident consultant to The Ottoman Fund Limited. Mr
Kalpakcioglu is a director and shareholder of the Turkish
subsidiaries and the joint venture due to Turkish law requirements.
Mr Kalpakcioglu receives no additional benefit from being a
shareholder of the Turkish subsidiaries.
Fees paid to Mr Kalpakcioglu amounted to GBP27,042 (2010:
GBP27,042); there were no amounts outstanding at the year end.
Vistra Nominees I Limited is a related party having acquired
through donation the 2 founder shares of The Ottoman Fund Limited
from Herald Charitable Trust on 24 June 2011.
Sinan Kalpakcioglu and Ali Pamir are shareholders in Mandalina,
which holds the title to the Alanya apartments (see Note 11).
The Directors do not consider there to be an ultimate
controlling party. 23. Directors' interests
Total compensation paid to the Directors over the year was
GBP150,000 (2010: GBP138,385). In the prior year, the amount
included a performance fee of GBP5,000 paid to Antony
Gardner-Hillman.
During the year John D. Chapman as Executive Chairman has been
employed under an executive service contract that provides for an
annual fee of GBP75,000 pro-rated monthly and a discretionary
bonus. No bonus has been paid during the year.
Eitan Milgram is an Executive Vice President of Weiss Asset
Management LLC which is a substantial investor in the Company.
During the year, Angelo Moskov was a partner with QVT Financial
LP which is a substantial investor in the Company. Mr Moskov
resigned from the Board on 11 August 2011.
24. Post balance sheet events
Kazikli sale
On 4 April 2011, the Board approved an offer to sell Kazikli
village ("Kazikli") for $9,500,000.
As part of the sale of Kazikli, the Group's interest in Mobella
(see note 14) will also be sold for a price of $50,000 which is
included in the $9,500,000. When the shares in Mobella have been
transferred, the loan from Osmanli Yapi 3 to Mobella will be
written down to zero. The loan has not been written down at the
year end as the deal has not been completed.
At the year end date, a deposit of $2,375,000 (GBP1,461,165) had
been received which is currently being held on the statement of
financial position as advances received.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DKQDBFBDDKBD
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